Stock Market Outlook for April 12, 2019
Market consolidating within a short-term ascending triangle, typically a continuation pattern.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
Stocks Entering Period of Seasonal Strength Today:
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Tandy Leather Factory, Inc. (NASD:TLF) Seasonal Chart
DMC Global Inc. (NASD:BOOM) Seasonal Chart
Alexandria R E Eqty, Inc. (NYSE:ARE) Seasonal Chart
Twin Disc, Inc. (NASD:TWIN) Seasonal Chart
Johnson Outdoors, Inc. (NASD:JOUT) Seasonal Chart
Le Chateau Inc. (TSXV:CTU.V) Seasonal Chart
Sun Communities, Inc. (NYSE:SUI) Seasonal Chart
Gamco Investors Inc. (NYSE:GBL) Seasonal Chart
Republic Bancorp, Inc. (NASD:RBCAA) Seasonal Chart
The Markets
Stocks closed flat on Thursday as investors jockeyed for position ahead of the unofficial start to earnings season on Friday with some of the big banks in the US. The S&P 500 Index closed essentially unchanged as strength in financials and industrials offset weakness in health care; the other sectors closed little changed on the day. The large-cap benchmark is showing signs of short-term consolidation just below psychological resistance at 2900. Short-term rising trendline support just below 2880 forms the basis of an ascending triangle, which is typically a continuation pattern. The short-term setup points to a target 35 points above recent resistance at 2895, which, if achieved, would get the benchmark within a hair of the all-time high at 2940. Reaction to earnings will be key.
According to Factset, S&P 500 earnings are expected to decline by 4.2% in the first quarter. If realized, this would represent the first year-over-year decline in earnings since Q2 of 2016. In the fourth quarter of last year, forward earnings per share estimates started to decline, indicating analyst pessimism regarding the strength of corporate America. Estimates have since stabilized just above $170 per share, putting a forward multiple on the benchmark of 16.7. Factset notes that analyst bottom up estimates for the S&P 500 is for a target of just under 3100 over the next year, representing an increase of just over 7% from present levels, excluding dividends. More important that targets is simply the trends of these indicators; when analysts estimates trend higher, this is typically conducive to higher stock prices. Conversely, when analyst estimates for earnings come down, such as what they did in the fourth quarter, the market re-prices accordingly. The revelation of Q1 earnings will be a determining factor in either ratcheting those expectations up or down and markets will likely follow suit.
Sentiment on Friday, as gauged by the put-call ratio, ended neutral at 0.99.
Seasonal charts of companies reporting earnings today:
S&P 500 Index
TSE Composite
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